FLORENCE, Italy, Oct 16 (Reuters) – The euro zone’s economy and financial system remain fragile and a new wave of bank write downs could be imminent, European Central Bank Executive Board Member Lorenzo Bini Smaghi said on Friday.

“The rapid expansion of provisions for bad loans suggests a new wave of bank write downs in the euro zone could be imminent, with a consequent reduction in assets,” he said in a speech in Florence.
Recent market developments have been better than expected and augur well for the prospects of stability, the central banker said.
“However, numerous risks and fragilities remain which, associated with a high degree of uncertainty, denote a persistent vulnerability of the financial sector.”
Bini Smaghi called on banks to reinforce their asset base and said new rules were needed to ensure they had sufficient capitalisation.